In another sign that the slowdown in the housing market continues, builder sentiment fell for the ninth straight month in September as the combination of elevated interest rates, persistent building material supply chain disruptions and high home prices continue to take a toll on affordability.

Builder confidence in the market for newly built single-family homes fell three points in September to 46, the lowest level since May 2014 with the exception of the spring of 2020, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today.

“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” said NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga. “In another indicator of a weakening market, 24% of builders reported reducing home prices, up from 19% last month.”

“Builder sentiment has declined every month in 2022, and the housing recession shows no signs of abating as builders continue to grapple with elevated construction costs and an aggressive monetary policy from the Federal Reserve that helped pushed mortgage rates above 6% last week, the highest level since 2008,” said NAHB Chief Economist Robert Dietz. “In this soft market, more than half of the builders in our survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions.”

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI components posted declines in September. Current sales conditions dropped three points to 54, sales expectations in the next six months declined one point to 46 and traffic of prospective buyers fell one point to 31.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell five points to 51, the Midwest dropped five points to 44, the South fell seven points to 56 and the West posted a 10-point decline to 41.

HMI tables can be found at nahb.org/hmi. More information on housing statistics is also available at Housing Economics PLUS (formerly housingeconomics.com).

*Note: All articles have been redistributed from NAHBnow.com*

Lot values for single-family detached housing starts in 2021 increased across the nation, with the national value and six out of nine Census division values setting new records. The U.S. median lot price now stands at $55,000, according to NAHB’s analysis of the Census Bureau’s Survey of Construction (SOC) data.

In the New England and Pacific divisions, lot values surged 67% and 39%, respectively, and reached new historic highs, even after adjustments for inflation. As a result, half of single-family detached (SFD) homes started in New England were built on lots valued at or more than $200,000. Though these new lot values seem sky high, these are consistent with record lot shortages, recent significant building material price hikes and unprecedented supply challenges that have been constraining the pandemic-fueled housing boom in 2021.

In the Pacific division, which has the smallest lots, median lot value reached $143,000 in 2021, the second most expensive value in the nation and a new record for the division, even after adjusting for inflation. As a result, Pacific division lots stand out for being most expensive in the nation in terms of per acre costs.

Similarly, the Middle Atlantic division recorded a strong rise in lot values and set a new record with half of lots priced at or above $90,000. The Mountain division followed with a median lot price of $75,000, a new divisional record.

Two neighboring divisions in the South — South Atlantic and East South Central — also posted divisional records. Nevertheless, these divisions remain home to some of the least expensive lots valued well below than the national median. Half of SFD spec homes started in these divisions in 2021 have lot values of $42,000 or less.

The West South Central, which includes Texas, and East North Central divisions were the only two divisions that posted moderate declines in the median lot values. Less than a decade ago, half of SFD lots here were going for $30,000 or less, almost half of the current median of $55,000.

When adjusted for inflation, lot values are now close to the record levels of the housing boom of 2005-2006, when half of lots were valued over $43,000, which is equivalent to about $57,800 when converted into inflation-adjusted 2021 dollars. At the same time, home building shifted toward smaller lots, resulting in record-high prices per acre.

Natalia Siniavskaia, Ph.D., NAHB Assistant Vice President for Housing Policy Research, provides more analysis in this Eye on Housing blog post.

*Note: All articles have been redistributed from NAHBnow.com*

According to NAHB analysis of quarterly Census data, multifamily for-rent housing starts surged during the second quarter of 2022 to 142,000 units, the largest quarter for rental multifamily construction since the second quarter of 1986.

The market share of rental units of multifamily construction starts bounced back to 96%. In contrast, the historical low share of 47% was set during the third quarter of 2005, during the condo building boom. An average share of 80% was registered during the 1980-2002 period.

Chief Economist Robert Dietz provides more in this Eye on Housing post.

*Note: All articles have been redistributed from NAHBnow.com*

The NAHB International Builders’ Show® (IBS) 2023 will once again feature two homes as its flagship exhibits: The New American Home® and The New American Remodel®. But this year, the remodeled home will be on display exclusively via an immersive virtual experience.

In the September Chairman's Update, NAHB Chairman Jerry Konter gives members a behind-the-scenes look at the development of the Inflation Reduction Act, and what it could mean for home building. Watch the video below to learn more about this important piece of legislation.

The National Association of Home Builders (NAHB) released its NAHB/Westlake Royal Remodeling Market Index (RMI) for the first quarter, posting a reading of 86, which remained unchanged compared to the first quarter of 2021. The finding is a signal of residential remodelers’ confidence in their markets, for projects of all sizes.